Summary Group income statement

Group sales, including VAT, increased by 15.1% to £59.4bn (last year £51.6bn). At constant exchange rates, sales increased by 10.6%. On a 52-week comparable basis, sales growth was 13.5%.

Underlying profit before tax (excluding the impact of the volatile non-cash elements of IAS 19, IAS 32, IAS 39, IAS 17, IFRS 3 – principally pension costs, the marking to market of financial instruments, the impact of annual uplifts in rents and rent-free periods, and the amortisation charge on intangible assets arising on the acquisition, this year relating to Tesco Personal Finance) increased to £3,128 million, up by 10.0%. On a 52-week comparable basis, underlying profit before tax rose by 8.8%.

Underlying diluted earnings per share increased by 7.0% to 28.92p, despite the significantly lower than normal effective tax rate in the prior year. Using a constant tax rate, underlying diluted earnings per share rose by 11.0% or by 9.7% on a 52-week comparable basis.

A final dividend of 8.39p per ordinary share (2008 – 7.70p) is proposed. Together with the interim dividend of 3.57p (2008 – 3.20p) already paid, this brings the full-year dividend to 11.96p (2008 – 10.90p) an increase of 9.7% on last year.

UK sales increased by 9.5% to £41.5bn (last year £37.9bn), including like-for-like growth of 4.3%, 2.7% from net new stores and a contribution of 2.1% from the 53rd week and a first-time contribution from the consolidation of TPF. Excluding petrol, like-for-like sales grew by 3.0%, with increases of 2.0% and 2.7% in the third and fourth quarters respectively. Adjusting for the reduction in VAT rates, which came into effect in early December, like-for-like growth excluding petrol was 3.7% in the fourth quarter.

Inflation reduced during the second half and our rate of growth was also impacted by a sharp increase during the year in the level of downtrading by customers seeking to spend less on their weekly shop. Tesco supported both of these trends by cutting prices and introducing more affordable products - including our successful new ‘Discounter’ ranges. A combination of recovering competitors and more subdued customer demand in some non-food product categories continued to hold back sales progress in the second half, although nonfood sales growth remained positive overall and broadly stable in like-for-like terms.

Increased productivity and good expense control enabled us to maintain solid margins and deliver good profit growth despite these challenges, whilst also absorbing initial trading losses totalling around £22m on Tesco Direct. After these costs, UK trading profit rose 12.7% to £2,381m (last year £2,112m), with trading margins at 6.2%, including TPF, slightly up on last year. On a 52-week comparable basis, UK trading profit rose 10.7%.

In December, we completed as planned the acquisition of The Royal Bank of Scotland Group PLC’s 50% shareholding in Tesco Personal Finance (TPF) and on becoming a subsidiary, its results were consolidated into our UK business for the final ten weeks of the financial year. During this period it contributed £163m to UK sales and made a small contribution to trading profit.

Total International sales grew strongly – by 30.6% at actual exchange rates to £17.9bn (last year £13.7bn) and by 13.6% at constant exchange rates. On a 52-week comparable basis, actual and constant exchange rate growth was 30.3% and 13.3% respectively. Sales growth slowed in Europe during the second half, which reflected deteriorating economic conditions in a number of markets. In contrast, sales growth in Asia accelerated, driven by the acquisition of the 36 Homever stores in South Korea at the start of the second half.

International contributed £709m to trading profit in the year (last year £636m), up 11.5% after charging £33m of Homever integration costs and pre-conversion losses. Before these costs, trading profit grew by 16.7%. Excluding initial US trading losses, International trading profits grew by 21.9%, or by 21.5% on a 52-week comparable basis. At constant exchange rates, and excluding initial US losses, International trading profits grew by 8.3%.

Total profit (net of tax and interest) from joint ventures and associates for the year was £110 million, an increase of £35m compared with last year. Tesco Personal Finance profit was reported within Joint Ventures and Associates for 50 weeks (50% share).

Net finance costs for the year were £362 million (2008 – £63 million). The rise principally reflecting increased average net debt levels linked to acquisitions and foreign exchange movements, higher coupon rates on commercial paper and unfavourable changes in the non-cash IFRS elements of the interest charge. The interest charge, excluding IFRS adjustments, rose by £150m.

Tax has been charged at an effective rate of 26.7% (2008 – 24.0%). This increase in tax rate is primarily due to last year’s one-off tax reimbursement, reflecting settlement of prior year tax items with HMRC.

The Summary Financial Statement and the Summary Report of the Directors are a summary of information in the Annual Report and Financial Statements 2009. This Summary Financial Statement does not contain sufficient information to allow as full an understanding of the results of the Group and state of affairs of the Group and of its policies and arrangements concerning Directors’ remuneration as is provided by the Annual Report and Financial Statements 2009.

The Report of the Directors, the financial statements and auditors’ report on those financial statements, which is unqualified, are contained in a separate publication entitled Annual Report and Financial Statements 2009. Copies may be obtained free of charge by writing to:

The Company Secretary
Tesco PLC
Tesco House
Delamare Road
Cheshunt
Hertfordshire EN8 9SL

Shareholders wishing to receive the Annual Report and Financial Statements as well as the Annual Review and Summary Financial Statement in future years should write to this address. The Summary Financial Statement was approved by the Board on 1 May 2009.

Sir Terry Leahy
Laurie McIlwee
Directors